Memorandum of Understanding Southern Iowa BioEnergy, LLC and SAFER Energy, LLC
Southern
Iowa BioEnergy, LLC and SAFER Energy, LLC
Southern
Iowa BioEnergy, LLC ("SIBE") and SAFER Energy, LLC ("SAFER") set forth in this
Memorandum
of Understanding (the “MOU”) and in the “Proposal For: Southern Iowa Bio-Energy,
LLC attached hereto as EXHIBIT
A,
and by
this reference incorporated herein (the “Proposal”), dated as of this 6th day of
November,
2007,
an outline of the material terms of the purchase by SIBE of a 40 million gallon
biodiesel production plant from SAFER, subject to good
faith negotiations towards definitive documentation (the "Definitive Agreement")
and as otherwise stated in this MOU. All dollar amounts are in US
currency.
1) Product
and Services: SAFER
will design, manufacture and install a Biodiesel processing plant
with a rated capacity of 40 million gallons per year (the "Plant") for the
gross
purchase price
of
$27.5 million payable as follows: $16.5 million in cash and $11 million of
Equity ("Shares"),
payable as set forth herein. The Plant shall be capable of producing biodiesel
to ASTM 6751 and EN 14214 standards and shall be installed at the Osceola site
in Xxxxxx County, Iowa.
2) Design
Phase. Upon
the
payment to SAFER by SIBE of $1.65 million in cash, and the issuance of
$1.1
million of Shares to SAFER to be held in escrow and disbursed as provided in
Section 11 of this MOU (the "Design Deposit"), SAFER shall begin the design
and
engineering
of the Plant (the "Design Services") and shall coordinate with the contractor
chosen
by
SIBE for site design and facilities design. If; during the Design Phase, SIBE
determines
it is unable to go forward, it shall notify SAFER in writing, which may be
by
facsimile
or other electronic means, to stop work. If so notified, SAFER shall stop work
and refund
to
SIBE any portion of the Design Deposit not used by SAFER for costs incurred
by
SAFER
for
such Design Services.
3) Manufacturing
Phase. Upon
the
payment to SAFER by SIBE of $3.3 million in cash, and the issuance
of $2.2 million of Shares to SAFER, with such Shares to be held in escrow and
disbursed as provided in Section 11 of this MOU (the "Manufacturing Deposit"),
SAFER shall begin
the
manufacturing of the Plant and the equipment to be installed in the Plant (the
"Equipment")
(collectively, the "Manufacturing Services"). Thereafter, beginning four (4)
weeks
after the payment of the Manufacturing Deposit, SIBE shall make further payments
to SAFER
totaling $4.95 million and $3.3 million of Shares in six equal installments
of
$825 thousand
in cash and $550 thousand of Shares each payable every four (4) weeks
(collectively, with the Manufacturing Deposit, the "Manufacturing Payment"),
with such Shares to be held in escrow and disbursed as provided in Section
11 of
this MOU. Alternatively, If SIBE chooses the
Letter of Credit method of payment to sub contractors then SIBE shall make
one
payment of
$8.25
million in cash and issue $5.5 million of Shares to SAFER (with such
Shares
to
be held in escrow and disbursed as provided in Section 11 of this
MOU)
at the
time of the Manufacturing Deposit.
4) Completion
Phase. SIBE
shall make payments to SAFER during the Completion Phase contingent
upon the occurrence of certain events for which SAFER is responsible, as more
fully set forth in the Definitive Agreement. Upon delivery of the manuals
to SIBE by SAFER, SIBE shall pay $825,000 in cash and issue $550,000 of Shares
to SAFER,
with
such
Shares
to
be held in escrow and disbursed as provided in Section 11 of this MOU. Upon
verification by SAFER to SIBE that the Equipment has been shipped, SIBE
shall
pay
to SAFER $1.65 million in cash and issue $1.1 million of Shares to SAFER,
with
such
Shares
to
be held in escrow and disbursed as provided in Section 11 of this
MOU.
Upon
delivery of the
Equipment to the Building Site, SIBE shall pay to SAFER $1.65 million in cash
and issue $1.1 million of Shares to SAFER, with such Shares
to
be held in escrow and disbursed as provided in Section 11 of this
MOU.
Subject
to reductions negotiated by the parties and included in the Definitive
Agreement, upon verification of output and production of the Equipment (the
"Commissioning"),
SIBE shall pay to SAFER $1.65 million in cash and
issue
$1.1 million of Shares to SAFER, ("Commissioning
Payment") with
such
Shares
to
be held in escrow and disbursed as provided in Section 11 of this
MOU.
5) Retainage.
At
the
conclusion of 12 months from the completion of the Completion Phase and
contingent upon final acceptance of the Plant by XXXX, SIBE shall pay to SAFER
$825,000
less any costs incurred by SIBE related to repair or adjustment to the Plant
necessary
to cause the Plant to perform to the certain engineering specifications and
not
previously
reimbursed to SIBE by SAFER, and issue the remaining $550,000 Shares to
SAFER.
6) Risk
of Loss. SAFER
shall be responsible for any and all risks of loss of the Plant through
and
including the completion of the Completion Phase. SIBE shall secure Builders
Risk & Hot
testing insurance, acceptable to SAFER.
7) Governing
Law and Dispute Resolution. This
MOU
and the Definitive Agreement shall
be
governed by the laws of the State of Kansas without consideration of its
conflicts of laws
and
SAFER and the parties shall use best efforts to negotiate in good faith
resolution of any
disputes between them.
8) Contingencies.
SAFER
understands and agrees that SIBE’s obligations as set forth in this MOU are
contingent upon execution of a Definitive Agreement and upon SIBE securing
financing, on terms and conditions
acceptable to SIBE, to perform under this MOU or any subsequent Definitive
Agreement, and that any such financing may include provisions and requirements
to
be
included in any Definitive Agreement. Under no circumstances is SIBE obligated
to perform under this MOU, other than working towards negotiating the Definitive
Agreement,
unless and until such financing is secured and, further, SIBE’s payment of the
Initial
Deposit shall not obligate SIBE to make any further payments to
SAFER.
9)
Title.
SIBE
shall not have title to any engineering designs, drawings, and other work
completed
by SAFER encompassed in the Design Phase until such time as all payments have
been
made
to SAFER by SIBE. Title to the Plant shall transfer to SIBE upon the completion
of
the
Completion Phase.
10)
Payment.
SIBE
shall pay SAFER the sum of $100,000.00 in cash on execution of this MOU.
$50,000
of this amount will be fully refundable to SIBE should for any reason the two
parties not
be
able to execute the Definitive Agreement. The remaining $50,000 will be fully
refundable to SIBE in the event SAFER fails to proceed in good faith toward
the
execution of the Definitive Agreement.
11) Escrow
for Shares.
All
Shares to be issued by SIBE to SAFER pursuant to this MOU shall be issued in
SAFER’s name at the time and upon the conditions set forth herein, but shall be
held in escrow until the final payment is due to SAFER as described in Section
5
of this MOU, and as more specifically set forth in the Definitive Agreement.
Such Shares shall be held in escrow pursuant to a written escrow agreement
to be
executed by the parties simultaneous with the execution of the Definitive
Agreement. During the term of such escrow, SAFER shall not enjoy any rights
or
benefits of ownership.
12) Additional
Terms.
The
Definitive Agreement shall contain additional representations, warranties,
covenants, conditions, indemnities and other terms as are customary for
agreements and transactions of the scope and nature described herein.
[Signatures
on following page]
| SAFER Energy, LLC | Southern Iowa BioEnergy, LLC | |||
| /s/ Xxxxxx Xxxxxx | /s/ Xxxxxxx X. Xxxxxx | |||
| Xxxxxx Carneu | Xxxxxxx X. Xxxxxx | |||
| Printed Name | Printed Name | |||
| Title: | Chief Executive Officer | Title: | Chair and CEO | |
| Date signed: | 6 November 2007 | Date signed: | 11-6-07 |
EXHIBIT
A
[attach
Safer Proposal]
